Crowdfunding: are ‘aspects of it … problematic’?

There is nothing like funding a former porn star to sue the President of the United States or a Brexit challenge to garner publicity for innovation such as crowdfunding litigation. And, there has been much – centred in the UK around the two major sites in the field: crowdjustice.com and goodlawproject.orgNow, we have a reflective article seeking to open up a debate on effectiveness and ethics: ‘No doubt, crowdfunding can—in certain cases—solve the resource shortage and be a key part of procuring reform via [public interest litigation]. At the same time, many aspects of it are problematic or hold the potential to become problematic.’ So, how should we respond to the issues raised?

We might begin by acknowledging that the author is supremely well qualified to tackle the task of starting a debate. Joe Tomlinson is both academic and research director at the Public Law Project that has played a leading role in the advance of public law for nigh on 30 years.

Crowdfunding litigation pivots on the web as a new way of bringing together potential funders with potential cases: ’the use of online systems … creates a new, important actor: the platform that hosts the campaigns. Platforms such as CrowdJustice are now key players in this area and possess power to affect how fundraising campaigns operate.’ Nevertheless, crowdfunding is, in essence, little more than the practices once banned (in the UK – though not everywhere) of third party funding of litigation through barretry, maintenance and champerty. Mr Tomlinson gives a nice historical summary of these in his article but a fuller version for history nerds is available in a 2013 speech by the retired President of the Supreme Court, Lord Neuberger. He has period detail such as the 1588 definition (at (30Eliz) 8 Rep 36, 77ER5): ‘‘A common barretor is a common mover or stirrer up or maintainer of suits, quarrels, or parties, either in Courts, or in the country, in Courts of Record, and in the County, Hundred, and other Inferior Courts.’

Crowdfunding has a particular context in England and Wales, as Mr Tomlinson very adequately describes, because of it has flourished in the embers of the fire that was once a comprehensive legal aid scheme. While public funding for legal aid has been cut in this area (and it should be noted that it has not entirely disappeared) so the space for private funding has grown. A particular advantage for domestic litigators is that legal aid not only funded a recipient’s costs, it also (effectively) protected them against the costs order for the other side that traditionally accompanies failure (not generally a problem in jurisdictions like the US). Mr Tomlinson is thorough on the current complications of potential liability – which can be mitigated if the court will agree a maximum amount in advance (‘a protective costs order’).

There is an initial point here. In practice, crowdfunding is dependent on three interlinked propositions: the net will sufficiently widen the net of those interested in funding; the law will allow the practice of maintenance in this way; and there will be some protection (or at least certainty) for litigants in relation to costs orders if they loose. Mr Tomlinson is good on the potential dangers and inconsistencies. If crowdfunding is too successful, governments might intervene to restrict either such legal aid as has survived or the operation of crowdfunding itself, or both. Or it could further obstruct the process of judicial review by delay, obfuscation or appeal. Bear in mind, those of you other than from the UK, that our constitution enshrines the principle of Parliamentary Sovereignty (in the process of re-shoring from Brussels) which means that our Supreme Court has powers that are but a shadow of that of the US. And always susceptible to being overridden by domestic legislation.

Like us all, Mr Tomlinson regrets the demise of legal aid but implicitly recognises that its return ain’t going to happen any time soon. So, crowdfunding is here to stay and ‘there is a need to engage closely with all stakeholders in creating an ethical framework for crowdfunding’. To some extent, the beginnings of such a framework exist in the code of conduct for litigation funders adopted by members of the Association of Litigation Funders though the net platforms would presumably have difficulty with requirements such as that to hold £5m in capital. This, however, raises a version of the Uber problem: does assertion that you are but a neutral platform excuse you from the regulatory requirements that might otherwise apply to your business?

There are some real problems here. Crowdfunding will always be patchy and more attractive for some types of cases than others. Public funding would be much better. Private mechanisms carry ethical risks – not only the direct involvement of the lawyer but also a potential subversion of the legal process as a court’s detailed costings of damages on the basis of proven need are shared out with funders and lawyers. One potential development might be that those seeking funding (or, more contentiously, those advertising for it) should credibly certify that a case has a reasonable chance of success. That would provide a measure of public protection. However this debate goes, Mr Tomlinson has done us a favour by starting it off.